Parliament in Berlin approves German share of EU aid

Both house of Parliament backed bill contributing funds, as expected

By

PolyaLesova

FRANKFURT (MarketWatch) -- The German Parliament approved Friday the country's contribution to the 750 billion-euro bailout plan put together by the European Union and the International Monetary Fund for euro-zone nations facing debt problems.

In Berlin, the lower house of Parliament, or Bundestag, passed the bill with 319 votes in favor, 73 against and 195 abstentions. The Social Democratic Party and the Greens abstained, while the Left Party voted against.

The approval was in line with expectations, since Chancellor Angela Merkel's center-right coalition government holds a majority in the Bundestag. Merkel is leading a coalition of her Christian Democratic Union and the Free Democrats.

The upper house of Parliament, which represents Germany's 16 federal states, also backed the legislation on Friday. Now, the German president has to sign the bill into law.

Under the legislation, Germany will contribute at least 123 billion euros to the joint EU-IMF rescue package. However, Germany's contribution may rise by 20% in case of unforeseen circumstances.

The approval of the legislation went as expected, said Win Thin, senior currency strategist at Brown Brothers Harriman & Co.

"Markets had priced this in already, and so the risk had been that a no vote would have caught the markets wrong-footed," Thin said in a note.

Speaking to the Bundestag before the votes, German Finance Minister Wolfgang Schaeuble said approval of the bill was in the national interest, adding that the single currency has been a "huge benefit to Germany," according to reports.

During the debate in the upper house, however, the government came under intense criticism from the opposition.

Social Democrat Sigmar Gabriel questioned Merkel's leadership, saying she had lost credibility and had no vision, according to reports.

In early May, the chancellor's coalition lost a key election in North Rhine-Westphalia, Germany's most populous state. The outcome reflected in part voter dissatisfaction with the government's decision to bail out Greece and other euro-zone nations facing ballooning deficits, analysts said.

The German government surprised the markets and its euro-zone partners on Tuesday when it unexpectedly announced a ban on so-called naked short-selling of certain assets, including 10 German financial stocks.

The unilateral ban exposed divisions within the euro zone and the lack of coordination among nations, with France quickly saying that it had no intention of imposing such a ban.

In Frankfurt, the benchmark DAX stock index (DAX) fell 2.6% in afternoon trading, as European equities posted losses across the board. See Europe Markets.

"There is broad backing in Germany for providing liquidity support to other euro-zone members," said Jon Levy, an analyst at Eurasia Group, in a note published before the votes.

"This is certainly not popular, but all mainstream political parties support the euro-zone plan, and the political argument that this is needed to ensure currency stability is powerful," Levy said.

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